 Income tax 2021-2022, business expenses, travel and meals. Get ready to get refunds to the max. Dive in into income tax 2021-2022. Most of this information can be found in Publication 334, Tax Guide for Small Business Tax Year 2021, Income Tax Formula, Line 1, Income, which would be supplemented with another schedule. Basically an income statement with income and expenses were focused in on the expenses here. Expenses basically being deductions. The net then would be flowing in to Line 1 income of the income tax formula as well as the tax return. On the tax return, we would have the Schedule C, basically an income statement, bottom line flowing into Schedule 1. Schedule 1 then flowing into Page 1 of the Form 1040, Line number 8 that we see here. This is the Schedule C, profit or loss from business, basically an income statement. As we look at the travel and meals, we're keeping the general idea in mind that we're focused in on the expenses, specific to the Schedule C as opposed to deductions that might be elsewhere on a tax return. Expenses generally needing to be ordinary and necessary to be deductible on the business side of things. That's going to be something important to keep in mind. When we're looking at travel and meals, always wanting to keep in perspective the IRS, possibly thinking that if something looks fun, even if it's ordinary and necessary, well, you might have to prove it a little bit more. You might want to make sure you have that evidence a little bit more readily in hand if you're deducting a fun type of thing under possibly a category of the travel and meals. But if it is ordinary and necessary, it should be a deductible item. So we got the travel and meals. This section briefly explains the kinds of travel and meals expenses you can deduct on the Schedule C travel expenses. These are ordinary and necessary. There's the key terms, expenses of traveling away from home for your business. You are traveling away from home if the following conditions are met. So every time I step out my door, I travel away from home. What does that even mean? Well, here's where we go. What does it mean to travel away from home? Number one, your duties require you to be away from the general area of your tax home defined later. So you got to be away from the general areas of the tax home due to duty. I was just doing my duty out there. So substantially longer than an ordinary day's work. So number two, you need to get sleep or rest to meet the demands of your work while away from home. So typically you're talking about an overnight stay somewhere because of the duty that was calling you for work. Generally, your tax home is your regular place of business regardless of where you maintain your family home. So we're talking tax home, not the family home. It includes the entire city or general area in which your business is located. You can see publication 463 for more information there if you got questions on what your tax home is. The following is a brief discussion of the expenses you can deduct. So what can you deduct then? Transportation. You can deduct the cost of travel by airplane, train, bus or car between your home and your business destination. So remember it's a business destination. You're doing it for business away from home and therefore you would think the transportation to get there airplane, train, bus would be something that you can deduct. It's not something, it's not a vacation. You're not going to the Bahamas just because you want to get a tan and drink something out of a coconut or something like that. It's a business thing and therefore ordinary and necessary possibly then deductible. Taxi, commuter bus and limousine. You can deduct the affairs for these and other types of transportation between the airport and station and your local hotel or between the hotel and your work location away from home. Baggage and shipping. You can deduct the cost of sending baggage and sample or display materials between your regular and temporary work locations. Car or truck. The car or truck gets a little bit confusing because we had the different kind of ways we would be accounting for the cart and truck. So obviously if we were taking an airplane to a separate location, that's pretty straightforward. There's going to be a travel related item if it's a business trip, but if it's a car and truck, then of course we've got to think about how we're going to make the deduction related to the car and truck expenses. So you can deduct the cost of operating and maintaining your vehicle when traveling away from home on business. You can deduct actual expenses or the standard mileage rate. There's that standard mileage rate again discussed earlier. We talked about that in a prior presentation as well as business related tolls and parking. If you rent a car while away from home on business, you can deduct only the business use portion of the expenses. So if you're over there renting a car, then the business portion, that's the part that you can deduct. You might have that kind of differentiation. You might have some business, some personal, where it gets a little bit confusing. Again, you've got to divvy out the business, the ordinary and necessary versus the personal. Meals and lodging. You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. So obviously then you're going to have lodging that's going to be involved there so that lodging may be included something like a hotel you would expect then. You can use actual expenses or the standard meal allowance. So you might have a standard meal allowance that possibly could be used in that case to calculate your deduction. You can deduct only 50% of your meal expenses. However, business meals are 100% deductible if the meals and food and beverages provided by a restaurant and paid or incurred after December 31st, 2020 and before January 1st, 2023, you could see publication 463 for additional information. So most of us, if you've been working to taxes for a while, you might still have it in your head. The meals and entertainment are 50% and then they made some adjustments to that basically restricting the entertainment side of things oftentimes and then you've got the meals are 50% but then in some cases the meals are basically 100%. So the meals get a little bit tricky because you can imagine the idea here being well is it a business related item or is it going to be a personal related item everybody needs to eat obviously so therefore how much of the meal should be deductible and so on and so forth. So you could dive more into that and get more detail on it by going into the publication 463 and dive into that in more detail. Then we have the cleaning. You can deduct the cost of dry cleaning and laundry while on your business trip because you got to look good. You don't want to be wrinkled up there when you're doing your trip presentation. Telephone, you can deduct the cost of business calls while on your business trip including business communication by fax machine or other communication devices. Nobody faxes anymore. Why is that even in the thing? This is old but yeah you can include those tips. You can deduct the tips you paid for any expense in this list. So the tips, more information for more information about travel expenses you can go to the publication 463 463 publication reimbursing your employees for expenses so now you got your employees and you're reimbursing them. You can generally deduct the amount you reimbursed for employees for travel and meals expenses. That seems fairly straightforward obviously as the schedule C business owner, sole proprietor, if your employees go somewhere and you reimbursed them you would think that would pretty legitimately be an expense. What you need to be careful of however is giving them a reimbursement of an expense as opposed to giving them wages. And remember this is kind of important because what you would like to do is give your employees as much money as you can that wouldn't be subject to them being taxed on it. So if they paid for something and you can reimburse them as opposed to basically including it in wages where they're going to be taxed on it you would rather basically reimburse them for it or possibly pay for it yourself and deduct the travel expenses yourself because if they pay for something and then you just say well I'll just increase your income line item then the money you're giving them will not go as far and therefore not be as beneficial to you or the employee because they're going to be subject to the income taxes on that. So those kind of fringe benefits and what not are things to think about. They can be important and significant to make sure the money that you're paying goes as far as it can go and you do that in any legal way that you can lower the tax bill to both yourself and the tax bill to the employee it makes the money go further. So the reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a non-accountable plan. So for more details you can see chapter 11 and dive into that on publication 535. That chapter explains accountable and non-accountable plans and tells you whether to report the reimbursement on your employee's W-2. So remember the idea here if it's reported in box one if it's income box one of the W-2 subject to federal unemployment I mean sorry subject to federal income tax to the employee then they're paying taxes on it. So you've got the reimbursements your reporting requirements for the reimbursements and whether or not those reimbursements are reportable on the W-2.